Getting a large tax refund feels great, but it means you’ve been overpaying taxes all year. Still, who wouldn’t want that extra cash in their pocket? Follow these tips to legally maximize your 2024 refund.
Choose the Optimal Filing Status
Your filing status determines your tax rates, standard deduction amount, and eligibility for certain credits.
- Head of household or married filing jointly often provide higher standard deductions than single or married filing separately.
- Run the numbers with tax software to determine the most advantageous status.
- Surviving spouses can use the married filing jointly tax rates for 2 years after their partner’s death by filing as a qualifying widow(er).
Max Out Retirement Account Contributions
Contributing to tax-advantaged retirement accounts reduces your taxable income.
- Fund a traditional IRA up to $6,500 if under 50 or $7,500 if over 50 by the April 2024 tax deadline.
- Max out health savings account (HSA) contributions to lower taxable income while saving for medical expenses.
Explore Overlooked Tax Credits
Tax credits directly reduce how much tax you owe, making them more valuable than deductions.
- Claim credits like the child tax credit, child and dependent care credit, and education credits if eligible.
- Energy efficiency home improvements also make you eligible for credits in 2024.
Itemize Deductions
Itemizing deductions lowers taxable income so explore if it’s better than the standard deduction.
- Deduct expenses like mortgage interest, charitable donations, medical expenses, and state/local taxes (up to $10k cap).
- Bunch itemizable expenses into one year to get over the standard deduction threshold.
Adjust Withholdings
Getting a refund means you had too much withheld from paychecks.
- Use the IRS tax withholding calculator to estimate ideal withholding.
- Submit an updated W-4 to your employer to change withholding amount.
Consult a Tax Professional
CPAs uncover overlooked deductions and optimize filing to legally maximize refunds. Their expertise pays for itself.
Getting a large refund might feel great initially, but it means you’ve been essentially giving the IRS an interest-free loan all year by overpaying taxes. Follow these tips to file accurately and efficiently while legally minimizing tax liability. That extra cash is better off in your pocket instead of the government’s.